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Driving Value In DC Default Funds

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Presentation delivered to the PMI Trustee Conference 9th November 2010

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Driving Value In DC Default Funds

  1. 1. Nigel Aston 09 November 2010 Driving Value in DC Default Funds
  2. 2. Some context
  3. 3. Some context Read more: http://www.professionalpensions.com/professional-pensions/news/1811130/financial-services-trusted-hand-car-salesmen#ixzz13SyWeDlm A lack of transparency and "difference between the advertised offer and the results of the service rendered". Investments, pensions and securities “trusted less than second-hand car salesmen”
  4. 4. What do trustees ask?
  5. 5. Research 2010 Sponsor Default Survey 2010 Provider Default Survey
  6. 6.  SOURCE: ProfileME TM PensionDCisions’ free on line risk profiler N ote: High Risk, Medium Risk and Low Risk reflect the top 33%, middle 33% and bottom 33% of risk score, respectively, across those individuals that were profiled . What do consumers want? Low Risk Medium Risk High Risk
  7. 7. What do consumers get?  SOURCE: PensionDCisions FT Provider Default Survey 2010 Average asset allocation consumed by schemes (FTSE PensionDCisions DC Growth Index)
  8. 8. Recommendation vs. Consumption  SOURCE: PensionDCisions FT Provider Default Survey 2010 Note: The increased diversification is despite three asset managers recommending 100% equity index trackers Average asset allocation recommended by respondents (asset managers) and consumed by schemes (FTSE PensionDCisions DC Growth Index)
  9. 9. Who does what?
  10. 10. Who does what?
  11. 11. Who does what?
  12. 12. Who does what?  Source: PensionDCisions. Note: Investment consultants are defined as primary driver if the plan sponsor cited them as influential, unless the underlying investment strategy provides the asset manager with independence to take asset allocation decisions. Respondents View of the Responsible Party for Asset Allocation Drivers of Asset Allocation Decisions
  13. 13. Is cheaper better?  SOURCE: PensionDCisions FT Provider Default Survey 2010
  14. 14. It’s about value, not about price  SOURCE: PensionDCisions FT Provider Default Survey 2010; Note: The Figure excludes those strategies with less than three years of performance data. Static includes balanced strategies.
  15. 15. The big question What’s everyone else doing?
  16. 16. . Transparency is needed  SOURCE: PensionDCisions CuBIT platform Note: * The Growth Stage includes only those active and deferred customers with more than 15 years to retirement and more than 3 years in scheme EMPLOYER level: 3-Year Risk / Return as at March 2010 (Growth Stage)
  17. 17. Return Risk (Volatility) n=158 employers, size of bubble indicates relative AUM of employer Transparency is needed  SOURCE: PensionDCisions CuBIT platform Note: Return as at March 2010 (Growth Stage) includes only customers with >15 years to retirement and > 3 years in scheme. Risk 3 Year Risk / Return as at March 2010 (Growth Stage) - 4% - 2% 0% 2% 4% 6% 10% 14% 18% 22% Employer Average Total Book Average FTSE PensionDCisions DC Growth Index FTSE 100 Index MSCI The World Index Free Employer A, B, C
  18. 18. Risk (Volatility) 3 Year Risk / Return as at March 2010 (Growth Stage)  SOURCE: PensionDCisions CuBIT platform Note: Return as at March 2010 (Growth Stage) includes only customers with >15 years to retirement and > 3 years in scheme. Risk Transparency is needed Return - 4% - 2% 0% 2% 4% 6% 10% 14% 18% 22% Employer Average Total Book Average FTSE PensionDCisions DC Growth Index FTSE 100 Index MSCI The World Index Free Employer A, B, C
  19. 19. FTSE PensionDCisions DC Index Series <ul><li>Holds up a mirror </li></ul><ul><li>Objective and transparent </li></ul><ul><li>Risk adjusted return and lifecycle </li></ul><ul><li>Yardstick for sponsors, trustees, consultants to calibrate asset allocation decisions </li></ul><ul><li>Additive – doesn’t replace objective </li></ul><ul><li>NEST </li></ul>
  20. 20. FTSE PensionDCisions DC Index Series <ul><li>DC plans with 250+ active members eligible. </li></ul><ul><li>Participation is free of charge and respondents receive: </li></ul><ul><ul><li>Analysis of the default strategies in place in large DC plans today. </li></ul></ul><ul><ul><li>The latest thinking from asset managers with respect to default strategies. </li></ul></ul><ul><ul><li>Designated access to FTSE PensionDCisions DC Index Series data, without charge.  </li></ul></ul><ul><li>The survey comprises six questions and takes less than 10 minutes to complete </li></ul><ul><li>Deadline is 28 January 2011 </li></ul><ul><li>Please contact </li></ul>
  21. 21. In summary

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